Auto, consumer loans spike in July on easing interest rates

The central bank’s recent series of monetary easing moves— meant to spur economic growth after a relatively weak first half —finally began to be felt in July with both bank lending and liquidity growth accelerating, the latest data revealed.

According to the Bangko Sentral ng Pilipinas, outstanding loans of universal and commercial banks, net of short-term placements with the central bank, grew at a faster rate of 11.1 percent in July from 10.5 percent in June.

The July data represented the first significant uptick in the pace of loan growth since the central bank started easing monetary policy in early May amid a steady downtrend in inflation, representing an implementation lag of around two months.

On a month-on-month, seasonally-adjusted basis, commercial bank loans net of short-term placements with the central bank grew by 2.1 percent.

Loans for production activities—which comprised 87.6 percent of banks’ total loan portfolio, net of bank placements with the regulator—grew by 9.8 percent in July, similar to the pace recorded in the previous month.

The growth in production loans was driven primarily by lending to real estate activities (18.1 percent); financial and insurance activities (19.1 percent); electricity, gas, steam and air conditioning supply (13.8 percent), construction (38.2 percent), and wholesale and retail trade, repair of motor vehicles and motorcycle (4.5 percent).

Bank lending to other sectors also increased during the month, except those in other community, social and personal activities (-41.3 percent) and professional, scientific and technical activities (-36 percent).

Loans for household consumption grew by 23 percent in July from 15.3 percent in June due to faster growth in motor vehicle and salary-based general purpose consumption loans during the month.

“Going forward, the BSP will continue to ensure that the expansion in domestic credit and liquidity remains consistent with the BSP’s price and financial stability objectives,” the central bank said in a statement.

Meanwhile, preliminary data showed that domestic liquidity grew by 6.7 percent year-on-year to about P11.9 trillion in July 2019, slightly faster than the 6.4-percent growth in June. On a month-on-month, seasonally-adjusted basis, M3 increased by 0.8 percent.

Demand for credit eased slightly but remained the principal driver of money supply growth. Domestic loans grew by 5.7 percent in July from 6.2 percent in the previous month. This was due mainly to the sustained growth in credit to the private sector. Loans for production activities continued to be driven by lending to key sectors such as real estate activities. —DAXIM L. LUCAS